Paying for college

Scholarships

Thinking about applying for scholarships can seem like an overwhelming prospect, and students have many excuses for not applying. There are so many scholarships available for college that knowing where to start is the first obstacle to the process. Remember, scholarships are the gift of money for college. A gift does not have to be paid back like a loan does.

Scholarships are offered to students who meet a specific requirement established by the sponsor, who may be an individual or an organization. Scholarships can be offered through local, state, or national sponsors. Each scholarship will have its own requirements based on the purpose of the scholarship. Scholarships are a good way to help pay for college without increasing student debt. Students may apply for multiple scholarships. Receiving a scholarship will affect the student’s overall financial aid award because all the student aid added together cannot be more than the cost of attending college. However, it is important to realize that scholarships are gifts and do not have to be repaid, so trying to include a scholarship in your overall financial aid package is a good idea.

Common Excuses For Not Applying For Scholarships

• Scholarships are only for people with good grades or athletic skills.
• There aren’t scholarships for someone like me.
• You have to be a good essay writer to win a scholarship.
• There is too much competition to even try.
• Finding scholarships to apply for is hard and takes too much time.
• Scholarship awards are for small amounts of money, so it’s not worth it.
• Scholarships are only for recent high school graduates.
• GED graduates can’t get scholarships.

Finding scholarships requires research and effort on the part of the student, but the effort can have a financially rewarding outcome. Searching for scholarships today is much easier than in the past. Students used to have to comb through books in counselors’ offices and photocopy applications to be put in the mail, snail mail!

The Internet has changed the search process. In today’s scholarship search process, a student can use several websites to help find the treasure. Never pay for help to search for scholarships. Websites that charge fees to find scholarships may be scams. The Scholarship Fraud Prevention Act of 2000 was passed to help increase the penalties for people convicted of scholarship fraud. Before this Act was passed, the Federal Trade Commission was limited to closing operations defrauding consumers. Now the government has the power to incarcerate or fine perpetrators of scholarship fraud.

Free help can be found through the college you have selected to attend as well as through several great websites. Check with student support services at your college to see what services are offered. Scholarship Junkies, Unigo, Fastweb, and Fin Aid are examples of online resources for finding scholarships to apply for. Unigo even has a section for scholarships that don’t require an essay.

Mistakes to avoid when applying for college scholarships

Scholarship committees want to give their money away to deserving students. It’s your job to properly sell yourself so they know why you are the right choice. Build a profile that can’t be ignored, one that showcases your originality, your character, and your drive to be successful. Avoid these common mistakes students make. Get your application done right!

• Deadlines – don’t miss them! Note the date, time, and time zone of the deadline.
• Fill out the application carefully – don’t be careless!
• Fill out the application completely – incomplete applications are often rejected.
• Double-check eligibility – if you aren’t eligible, move on to another scholarship.
• Proofread – both your application as well as the essay or personal statement.

Your attention to detail during the scholarship application process can save you time and money later.

Financial Aid

Financial Aid Basics

Most students will need some form of financial aid to help pay for college. Before accepting an offer of assistance, it is important for a student to understand what each possible offer means and what the student’s responsibility will be after accepting the offer. The Office of the US Department of Education offers financial assistance to students in the form of grants, loans, and work-study programs. Filling out the FAFSA application is the first start towards receiving financial aid for college.

Understanding interest rates and how they impact student loans is essential. Many students shy away from doing the math to understand what their responsibility will be in repaying a loan. It is also essential that students understand the difference between a subsidized and unsubsidized loan. Both types of loans may be offered to a student in an award letter for financial aid. Many of the horror stories about the burden of college debt on students when they graduate from college could be avoided if students better understood options for financing their college education and examined their college selection process in greater detail.

There is a difference between a flat/annual interest rate and a compound interest rate. Compound interest can make you very happy as an investor, but it works against you as a borrower. Subsidized loans do not add interest while a student is attending college. The interest is not compounded while the student is attending college. Unsubsidized loans begin charging interest as soon as you take out the loan as a car loan would.

The key difference between unsubsidized and subsidized loans is the amount of debt a student will leave college owing. Unsubsidized loans charge students interest while they are attending college, so the interest is growing on the loan during that time. A student might think they are borrowing $4,000.00 or $6,000.00, but unsubsidized loans add interest to the amount borrowed that adds up over time. Subsidized loans do not add interest while the student is attending college, so $4000.00 really is $4,000.00, no extras added.

Another important thing to remember when borrowing money for college is that if you add the cost of books and supplies or other needs onto the loan you have taken on for tuition, and you have unsubsidized loans, that extra money also grows over time with interest.

Loan Calculator

Students need to remember that they are consumers when it comes to taking on loans for college. Not thinking about what the debt means after college only compounds the issues. It is important to think about how much could you afford to pay monthly on a student loan once you have completed college. It’s easy to do the math on loan costs. The Smart Student’s Guide to Financial Aid has a free loan calculator that will do the work for you. All you have to do is plug in the numbers. The loan calculator will also give you an estimate of what your annual salary will need to be able to repay the loan. Of course, the loan calculator will not know your other financial commitments, so be sure to look at the monthly payment and decide if you can afford that additional expense. College debt is considered a partial economic hardship if it requires you to use more than 15% of your discretionary income.

Repayment

It is also important to realize that even if you don’t finish college, you will have to repay a loan taken out for college. According to an article titled The Feds Don’t Care If You Dropped Out of College. They Want Their Money, students who dropped out of college and ultimately didn’t obtain a degree or certificate, generally don’t earn higher wages after leaving school. Statistics show that students who start college but don’t finish struggle with student debt.

The US government backs loans that are taken out through FAFSA/Federal Student Aid. Repayment is expected. The government has the authority to garnish wages and withhold tax returns as part of the repayment of loans that are not paid. Government-backed debt cannot be forgiven in bankruptcy, except under rare circumstances.

The cost of going to college seems to be constantly increasing. Understanding the opportunity cost both now and in the future needs to be an important part of a student’s decision process when selecting a college and a major. Do the math! There are plenty of resources to help you. Follow your dreams, but be informed.

Financial aid vocabulary is a specialized language that students participating in the process must understand.

Common Financial Aid Vocabulary Definitions

activity 7.1: Voices of debt: the student loan crisis